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    zipfel's Avatar
    zipfel Posts: 4, Reputation: 1
    New Member
     
    #1

    May 30, 2008, 03:19 PM
    New credit affect on home closing
    I am a couple of weeks away from closing on our new house, will new credit (auto loan) affect the closing?
    danielnoahsmommy's Avatar
    danielnoahsmommy Posts: 2,506, Reputation: 297
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    #2

    May 30, 2008, 03:21 PM
    Yes it would. I have no idea what you should do. Perhaps ask your attorney or your mortgaage comp. income debt ratio changes
    zipfel's Avatar
    zipfel Posts: 4, Reputation: 1
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    #3

    May 30, 2008, 03:27 PM
    If my debt to pay ratio doesn't change or my payment amount goes down, will that matter?
    danielnoahsmommy's Avatar
    danielnoahsmommy Posts: 2,506, Reputation: 297
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    #4

    May 30, 2008, 03:28 PM
    I don't know
    Fr_Chuck's Avatar
    Fr_Chuck Posts: 81,302, Reputation: 7692
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    #5

    May 30, 2008, 03:29 PM
    Yes, it does change, and since the mortgage is not issued yet, they can deny it when and if they do a last check prior to closing.
    It may increase your debt expense each month, it will increase your debt to income ratio. So if you have not done it yet, don't.

    So your new car is gong to make you owe less money than you did owe, are you trading in a 20,000 loan vechile for a 10,000 loan
    I can not believe you are bying a new car and will not owe a lot more money.

    But yes, it can effect it, if you are only a few weeks from closing , close first
    zipfel's Avatar
    zipfel Posts: 4, Reputation: 1
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    #6

    May 30, 2008, 03:33 PM
    Thank you both very much for your answers... you may have saved me on making a potential big mistake, I don't think I will risk it just to get my payments down and save on gas costs... I can wait.
    zipfel's Avatar
    zipfel Posts: 4, Reputation: 1
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    #7

    May 30, 2008, 03:47 PM
    Thank you for your advice. The new vehicle was going to increase in loan amount, but with a 6yr loan my payments would have dropped by close to $70 a month, plus insurance decreasing $75 and an additional $50 on average in gas costs... this is the only reason I was considering the idea, but thought to ask for some advice first. Again Thank you FR_Chuck.
    Loan_Guy's Avatar
    Loan_Guy Posts: 83, Reputation: 6
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    #8

    May 30, 2008, 08:45 PM
    Zipfel and others...

    I completely agree with the issue of debt ratios being a factor here. If your payment goes down, that's a plus, but...

    What is the credit score that you are approved for on the loan? If you are close to 720, 680, 620 or 580, you may cause yourself some problems. Here's why...

    If you trade in a vehicle that you have had for three years for a different one, you will lose 36 months of rated payments and your report will show a new loan with ZERO payments made.

    Also, let's say you took out a loan for $20,000 and now owe $12,000. You are not near your high limit. If you trade it in on another $20,000 vehicle, you will have a $20,000 loan with a $20,000 balance. This will negatively affect your credit.

    If your scores were above those numbers and then drop below, you could pay a higher interest rate, more points, higher PMI (if needed), be hit with a higher Loan-Level Price Adjustment, require a larger downpayment, and maybe even be denied the loan depending on the type.

    So the moral of the story is: rent a car now if you have to, but do not buy OR HAVE YOUR CREDIT RUN excessively until after you close on your home. The lenders may very well run your credit again a couple days prior to closing.

    Hope this is somewhat clear.

    LG

    PS. And for goodness sake, do not do anything silly like quit your job before you close!

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